SBIR Gateway

SBIR Insider Newsletter
July 15, 2010



Dear SBIR Gateway Insider,

As many of you know, without reauthorization or another continuing resolution (CR) to extend the SBIR & STTR programs, these programs will expire for all agencies EXCEPT the DoD, on August 1, 2010. The DoD SBIR & STTR are safe until they expire on October 1, 2010.

There are some hopeful signs on the near horizon, but significant danger as well. We also have several other positive areas of SBIR news to report. However, at the risk of sounding like "Poor Johnny One Note" we will start with reauthorization.

In this issue:

Background for our new readers: Back in July of 2009 the House & Senate passed their own vastly different SBIR reauthorization bills H.R. 2965 and S.1233. Technically the Senate took the House's H.R. 2965 and substituted the House's language with Senate's S.1233. At this point in the legislative process, the House & Senate were to form a "conference committee" to resolve any differences, compromise and reconcile the language into a final bill that can be passed by both and sent to the President. In this case the conferencing was to be done by senior staff members of both small business committees. The House refused to negotiate, and in October of 2009 the Senate sent the House a very generous (some say overly generous) compromise offer. The House would not even acknowledge the offer, and the SBIR program has been kept alive by a series of short term extenders sometimes referred to as continuing resolutions (CR).

House Finally Responds To Senate Compromise

In our last issue we outlined an exceedingly generous compromise the Senate Committee on Small Business & Entrepreneurship (SBE) made to the House Small Business Committee (SBC) in order to try and reconcile their SBIR reauthorization bills into one bill that could be passed by both House & Senate. We included many of the details of this offer which you can find at http://www.zyn.com/sbir/insider/sb-insider05-24-10.htm

The Senate SBE compromise offer was made to the House SBC way back in October of 2009 but the House SBC didn't even bother to respond, until a couple of weeks ago. Time is of the essence because the current CR expires at the end of July. Perhaps lost in the shuffle is the fact that the Senate's compromise offer expired December 31, 2009.

The details of the House's response to the Senate have not been publicly disclosed. However, it is known that once again the major issue is that of SBIR eligibility for entities majority owned and controlled by Venture Capital Operating Companies (VCs).

Major lobbyists and campaign contributors, the Biotech industry Organization (BIO) and the National Venture Capital Association (NVCA) have pressed for unfettered access to SBIR program dollars for their VCs. They basically "own" the House Small Business Committee, under the leadership of Nydia Velazquez (D-NY) and have gotten their way 100% of the time in the committee's SBIR hearings.

These lobbyists have been less successful with the Senate Committee on Small Business & Entrepreneurship under the leadership of Mary Landrieu (D-LA). This is not a partisan issue as Ms. Landrieu has an excellent relationship with ranking member Olympia Snowe (R-ME) who has previously been the committee chair. In the House, Ms. Velazquez enjoys her ranking member Sam Graves (R-MO) who is equally sympathetic with their benefactors from BIO and NVCA.

Some SBIR Insiders on the Hill believe there is a good chance for SBIR/STTR reauthorization before the end of the month. It will be challenging but possible. One way or the other, you will be hearing from us in the next two weeks concerning reauthorization, continuing resolution, or worst case, lapse of the programs (highly unlikely).

To Compromise Or Kick The Can And Roll The Dice

Here's a story you may not want to hear, but it's being discussed only in the darkest regions of legislative hell, and you may play a role. Don't think the SBIR program can't go away, because it can!

For the moment, forget about what you perceive as right or wrong, pro or con. There are powerful forces that want greatly expanded VC access to SBIR, there are some who want no changes to the current rules, and there are some who want a reasonable compromise.

I can't tell you how hard it has been for the Senate staffers to construct a compromise that they feel retains the integrity of the program, and gives some additional access to the powerful VC and BIO community. Without some sort of compromise there will be no reauthorization in this congress.

With no reauthorization, additional CRs will be necessary to kick the SBIR reauthorization "can" down the road to the next congress. Perhaps they'll make a short kick and try reauthorization in the lame duck session after the election, but that's doubtful. In any event, the agencies generally will be, and have been more cautious about making awards in an uncertain SBIR budget environment (they have been struggling with 7 CRs since 2008).

In kicking the SBIR "can" to the next congress, we would be rolling the dice, and unlike Las Vegas, we don't know the odds on our bet. We do know there will be many new faces that never heard of SBIR, and with the enormous challenges they will face, SBIR will not be on their radar screen. Also, many of these newly elected people will be have been elected to shrink government and spending. Looking at a $2.5B program, they may not realize or care that SBIR is an allocation rather than appropriation, and it can easily get cut or just sunset as a part of trimming government spending.

There is one major caveat to a compromise. Whatever compromise may be made on the VC eligibility issue, it must be totally insulated from the greater small business community and all other federal government programs.

Lloyd Chapman from the American Small Business League (ASBL) ( see www.asbl.com ) is one of the greatest champions in fighting against large interests taking small business program and procurement dollars. Although Mr. Chapman and the ASBL support the SBIR program, he does not support a compromise with the VC's on the small business eligibility issue. He believes that this type of compromise will create a slippery slope for the entire small business community.

I can't argue against Mr. Chapman's point of view. Consider the fact that Congressman Jason Altmire (D-PA), who is not only the author of the House's SBIR bill that gives BIO and NVCA everything they wanted, he also attempted to do the same thing for NVCA and the VCs against the entire small business community in his bill "Small Business Investment Expansion Act of 2007" That bill (one of the most abysmal small business bills of all time) passed the House 325 to 72! Does anyone want to argue with Milt Stewart's quote about Congress and small business? "In public they'll hug you, in private they'll mug you." Fortunately the Senate dropped Mr. Altmire's bill it like a hot potato.

DOE Announces New "XLerator" Program - $30m Phase III Funding

There have been some changes and great things brewing at the Department of Energy and their SBIR/STTR program. In our March 1, 2010 SBIR Insider, we introduced you to a new (to us) SBIR Champion, Dr. Kristina Johnson, DOE Under Secretary (see article at www.zyn.com/sbir/insider/sb-insider03-01-10.htm#three ).

Since that March article we had the opportunity to speak briefly with Dr. Johnson and hear her address two other conferences, one being the National Academies' "Early-Stage Capital in the United States: Moving Research Across the Valley of Death and the Role of SBIR", and the other being the National SBIR conference in Hartford. No question, she "gets it!"

While the NIH lamented that without the former VC participation, the number and quality of SBIR proposals dropped markedly, DOE's Dr. Johnson stated that they have been receiving many more quality proposals than they could fund, and she wanted to try and find a way to fund them.

Unlike NIH who did the congressional "sneak attack" in the midnight hours in congress to exempt their ARRA (recovery act) R&D budget dollars from SBIR, Dr. Johnson is using DOE's ARRA dollars to fund proposals.

The new DOE XLerator program is not using SBIR funds, and has Dr. Johnson's finger prints all over it. I think you'll see why it is easy to offer superlatives in her direction. However, this would not be possible without an excellent and knowledgeable staff, and we have to tip our hat to Charles Russomanno at DOE who is one of the bright lights and visionaries in the world of SBIR.

Here's a portion of the DOE's press release:

U.S. Energy Secretary Steven Chu announced today that $30 million in funding from the Recovery Act and FY 2010 budget appropriations will be made available to qualified small businesses to support the commercialization of promising new technologies.

Today's funding announcement builds on the Department's existing efforts under the Small Business Innovation Research program (SBIR) and the Small Business Technology Transfer program (STTR) to develop near-term clean energy technologies and support American small businesses that will play an important role in building the clean energy economy of the future. This is the first time DOE has offered Phase III awards under these small business programs.

"Small businesses are engines of job creation and innovation, and we need their ingenuity and entrepreneurial spirit to drive a clean energy economy," said Secretary Chu. "By helping America's small businesses bring these innovative technologies to market, we will spur economic growth and help reduce the country's energy use."

Small companies previously awarded Phase II grants through DOE's Small Business Innovation Research program (SBIR) or the Small Business Technology Transfer program (STTR) are eligible. Projects that include developed technologies with a strong potential for commercialization and impact on U.S. manufacturing and job creation are encouraged to apply. Successful applicants may receive up to $3 million over 3 years to research, develop and deploy new technologies.

Now down to business: The offering is open now and the response date is August 4, 2010. The easy part: You can view the entire press release with all the technical topics at http://www.energy.gov/news/9209.htm

The more difficult part: This is a grants based opportunity and DOE is using the FedConnect for the full announcement and grants.gov for applications. The Fedconnect site is not user friendly, (surprise…) so here's the easiest way to get to the solicitation: Go to

https://www.fedconnect.net/FedConnect/PublicPages/PublicSearch/Public_Opportunities.aspx then in the longer box under "Advanced Options" type in xlerator and click on search, then on the next screen click on DOE FY2010 Phase III Xlerator Program. Of course you already know the drill for grants.gov

If you want an "unofficial" quick view of the 45 page PDF, we created one for you at www.zyn.com/sbir/insider/DOE_Phase_III_Xlerator-quickview.pdf If you find items of interest please use the FedConnect information above to download the latest "official" version.

NIST SBIR Program Manager Change

I'd like to say it isn't so, but it is. Clara Asmail, NIST SBIR Program Manger since 2001 has taken a new position within NIST in their Manufacturing Extension Partnership (MEP) program.

Ms. Asmail is a true visionary and created a unique twist in SBIR called SBIR-TT (with the TT representing Technology Transfer). SBIR-TT actually provided competitive funding to small businesses interested in maturing and commercializing some excellent NIST technologies. She realized that this program should be an adjunct to, not a replacement of, the traditional SBIR program.

In 2001 she inherited a very small NIST SBIR program that was actually being managed by NOAA. Clara, almost single handedly took this small program and turned into a very innovative and unique SBIR program.

Clara has been working with other agencies SBIR program managers interested in adopting an SBIR-TT program. SBIR is in Clara's blood, so don't look for her to stray too far away.

NIST has posted an announcement in USAJOBS for a new SBIR Program Manager. Below is an official statement from NIST:

Dr. Jack Pevenstein will be the acting SBIR Program Manager for the National Institute of Standards and Technology (NIST) beginning June 21, 2010. The former NIST SBIR Program Manager, Clara Asmail, has moved to NIST’s Manufacturing Extension Partnership (MEP) Program where she will continue to support small businesses and commercialization of federal and university technologies.

Information about NIST’s SBIR program and contact information is available on-line at http://www.nist.gov/ts/otp/sbir/index.cfm. A vacancy announcement has been posted for a permanent NIST SBIR Program Manager and is open from July 8 through July 22, 2010. The vacancy announcement is available on the USAJobs website at: http://jobview.usajobs.gov/GetJob.aspx?JobID=89211951&JobTitle=Physical+Scientist&q=nist&where=&brd=3876&vw=b&FedEmp=N&FedPub=Y&x=0&y=0&AVSDM=2010-07-08+00%3a03%3a00

Progress On DOD's Rapid Innovation Program

In our last issue we told you about the early stages of a DoD Rapid Innovation Program being created in the House Armed Services Committee under the direction of its chair Ike Skelton (D-MO). Ranking member Howard (Buck) McKeon (R-CA) is a cosponsor.

This program is part of the National Defense Authorization Act for Fiscal Year 2011, H. R. 5136. Section 1054 of this act states:

The Secretary of Defense shall establish a program to accelerate the fielding of innovative technologies developed using Department of Defense research funding and the commercialization of such technologies.

The funding amount was not to exceed $500M per year through 2015. The bill passed in the House by a vote of 229 to 186, and was sent to the Senate in late June and is being considered by the Senate Armed Services Committee.

The Small Business Technology Council (SBTC) is working on its final draft of a Rapid Innovation Program white paper that will be published soon. It will be on their web site at www.sbtc.org

Ike Skelton, an SBIR champion received a resounding standing ovation after his presentation at the recent Navy Opportunity Forum in DC. He expressed his understanding and appreciation of the importance of small businesses participating in the SBIR program.

Kudo's must also go to Mr. Timothy McClees, a senior staffer with the House Armed Services Committee. He has worked very hard on this legislation and was also an important and vital resource in helping to extend the DoD SBIR program through the end of the FY-2010. He worked closely with his Senate Armed Services counterpart, Arun Seraphin who is now at DARPA. The ultimate kudos for this success goes to their bosses, Ike Skelton and Carl Levin.

Nydia, SBA & Heroes Of Small Business??

Isn't it a strange world we live in? We heard from the "ultimate authority" of the House Small Business Committee, its chair Nydia Velazquez, that "Without the participation of venture-backed companies, the SBIR program has become little more than corporate welfare for marginal companies who are unable to secure external market based funding."

During National Small Business Week (or should I say "weak") the House SBC held a hearing to honor what it called Heroes Of Small Business. Fifteen small businesses briefly told their stories of hardship and success. These companies provided moving and in some cases emotional testimony of company survival, ebb and flow, expansion and contraction, but overall perseverance in achieving success.

There was one thing that all fifteen "Heroes Of Small Business" companies had in common, NO VC INVESTMENT!! Most of them had another thing in common, SBA backed loans!

For the most part these companies stated they couldn’t have made it without SBA loan assistance, and they were grateful to the SBA for it. They were often critical of banks and private sector financing that was either not available to them, or at a cost they couldn't afford.

One may ask Velazquez, is this corporate welfare for marginal companies? Why were there no VC backed small businesses that were "heroes?" Do you have a dual standard, one for technical SBIR small businesses and one for all other small businesses?

As long as we're talking about marginal and technical, perhaps someone can address why the committee is marginal in their technical approach to presenting the videos of their hearings on youtube? Take a listen to the Heroes' hearing (or should I say "lack of hearing" because the audio is almost imperceptible) on their youtube site at
http://www.youtube.com/watch?v=jl-RAoa8Avg&feature=PlayList&p=84BB84CBEBDDAEA4&playnext_from=PL&index=0

In fairness we should give some kudos to Ms. Velazquez for her committee leadership. On July 6, 2010 she was "honored" by InformationWeek magazine as having one of the 12 worst government web sites (this was also mentioned in Federal Computer Week).

Perhaps the committee wouldn't be "marginal" if they were VC backed… but then again, it appears that they are….

The investment community are not the bad guys in this. There is a place and a need for venture capital. It is unfortunate that a couple of wealthy and powerful industry trade groups such as BIO and NVCA have been able dominate the topic in the House, by having Velazquez totally shut out the small business community opposed to the VC eligibility changes. There have been NO small businesses allowed to testify against the VC change before her committee.

This is more reflective of the former Soviet Union whose commissars ruled without opposition. Ms. Velazquez runs for office without serious opposition, and perhaps feels she can behave as a commissar. Although she receives no backlash from her constituents, her behavior is ultimately bad for her party, in spite of the money she raises for them. More importantly, it's bad for the country.

We'll be back in a couple of weeks with the CR or reauthorization status as we approach the July 31st deadline.

Thanks again for your time and we welcome your comments.

Sincerely,

Rick

Rick Shindell
SBIR Gateway
Zyn Systems
40 Alderwood Dr.
Sequim, WA 98382
360-681-4123
rick@zyn.com
www.zyn.com/sbir

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